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Chart Book: Accomplishments of the Safety Net

UPDATED

November 17, 2015

Today’s safety net both keeps tens of millions of Americans out of poverty and has positive longer-term impacts on children, helping them do better (and go farther) in school and work and earn more as adults. Still, poverty remains high and many families face serious hardship.

Part I: The Safety Net Is Effective Against Poverty

The safety net cuts poverty nearly in half. The safety net kept 38 million people out of poverty in 2014 — including more than 8 million children — according to the federal government’s Supplemental Poverty Measure (SPM). Unlike the official poverty measure, the SPM counts non-cash benefits, tax credits, and income and payroll taxes paid. It also takes certain expenses (such as child care) into account when considering the income that a family has available to buy basics such as food, clothing, and shelter, and it uses a modernized poverty threshold that accounts for geographic differences in the cost of living.

The SPM poverty rate would be 27.3 percent if no government assistance were taken into account but falls to 15.3 percent when such benefits are counted, our analysis of Census Bureau data shows. The safety net also sharply reduces poverty among children.

These SPM figures, however, understate the safety net’s effectiveness. The safety net lowers the poverty rate by more than halfwhen using data that correct for households’ underreporting of key government benefits in the Census survey. Household surveys depend on participants’ recollections over many months and typically fail to capture some income; the Census data are no exception.

In 2012, the most recent year for which these corrections are available, the safety net lowered the SPM poverty rate from 29.1 percent to 13.8 percent — 2.2 percentage points lower than in SPM data without these corrections.

We use data from the Urban Institute to correct for underreporting in the Census Bureau data for six types of government assistance: Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), Supplemental Security Income (SSI), housing assistance, Temporary Assistance for Needy Families (TANF), the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and the Low Income Home Energy Assistance Program (LIHEAP).

Correcting for underreporting makes an especially big difference in the poverty rate for children, who are more likely than other age groups to receive benefits such as SNAP, TANF, housing assistance, and WIC.

SNAP keeps 10 million people out of poverty. SNAP kept 10.3 million people — including 4.9 million children — above the poverty line in 2012, using data that correct for underreporting. This is twice as many people as in figures previously reported by the Census Bureau that do not make these corrections.

SNAP also lifted 2.1 million children out of “deep poverty” (defined as incomes below half of the poverty line) in 2012, more than any other government assistance program. SNAP keeps more households with children out of “extreme poverty” — defined as having income of less than $2 per person per day — than any other government program.

One reason SNAP is so effective in fighting extreme poverty is that it focuses on many of the poorest households. Roughly 92 percent of monthly SNAP benefits go to households below the poverty line, and 57 percent go to households below half of the poverty line (that is, below $814 a month for a family of three in 2013), program records show. One in five SNAP households lives on cash income of less than $2 per person a day.

Tax credits keep 9 million people in working families out of poverty. Together, the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) kept 9.4 million people, including 5 million children, out of poverty in 2013. They also reduced the severity of poverty for another 22.2 million people, including 8.1 million children.

Key CTC and EITC provisions are set to expire at the end of 2017. If that happens, 16.4 million people, including 7.7 million children, will fall into — or deeper into — poverty.

Social Security keeps 17 million seniors and 10 million others out of poverty. Social Security lifted 26.9 million people out of poverty in 2013, using the SPM. This includes 17 million seniors ages 65 and older as well as many younger adults (early retirees, disabled workers, and survivors of deceased workers) and more than 1 million children. Without their Social Security income, 53 percent of seniors would have been poor in 2013, the Census Bureau reports; with Social Security, their poverty rate under the SPM is 15 percent.

The figures above use the Supplemental Poverty Measure. Because Social Security provides cash assistance, it also has a strongeffect on the official poverty measure.

If Social Security did not exist, many elderly individuals likely would have saved somewhat more and worked somewhat longer, and many might live with their adult children rather than in their own households. Studies confirm, however, that Social Security makes a very large contribution to reducing poverty.

Corrected numbers reveal a larger anti-poverty impact for safety net programs. For example, SNAP lifted 10.3 million people above the poverty line in 2012 when using data that correct for underreporting, more than twice as many as when using uncorrected data (4.9 million). SSI lifted 5.1 million people above the poverty line using corrected data, compared to 3.3 million using uncorrected data. Housing assistance programs such as rental vouchers and public housing lifted 4.0 million people above the poverty line using corrected data, compared to 2.8 million using uncorrected data.

“Means-tested” programs overall — those limited to people with low or modest incomes — lifted more than 27 million Americans above the poverty line in 2012. These programs include SNAP, housing assistance, SSI, TANF cash assistance, and the EITC and the low-income component of the Child Tax Credit.

Expanded poverty measure shows progress against poverty that the official measure masks. Some policymakers and pundits have argued that federal anti-poverty programs are ineffective, noting that the official poverty measure fell sharply between 1959 and 1969 but has changed relatively little since then, apart from fluctuations due to the business cycle.

However, comparing poverty rates in the 1960s and today using the official measure yields misleading results because the official measure doesn’t count programs like SNAP, the EITC, and rental vouchers, which now constitute a much larger part of the safety net than 50 years ago.

Columbia University researchers, using a more comprehensive poverty measure (and adjusting the poverty line for inflation), found that the poverty rate fell from 26 percent in 1967 to 16 percent in 2012 when one includes this assistance, as most analysts believe should be done.

The chief reason for the progress was the growing effectiveness of the safety net, the Columbia researchers found. In 1967, government assistance lifted out of poverty just 4 percent of those who would otherwise be poor; by 2012, that figure had jumped to 44 percent. If no government assistance is counted, the poverty rate shows no progress between 1967 (27 percent) and 2012 (29 percent). But when the safety net is included, the poverty rate is seen to have declined substantially over this period.

The Columbia researchers also found that the child poverty rate fell from 29 percent in 1967 to 19 percent in 2012 (counting government benefits), again because of an increasingly effective safety net.

Part II: The Safety Net Has Other Positive Effects

The safety net provides long-term benefits. Recent research has documented that programs such as SNAP and the EITC have longer-term positive impacts.

Children with access to food stamps in the 1960s and 1970s grew up healthier and were more likely to finish school. A recent study of what happened when food stamps (now called SNAP) gradually expanded nationwide in the 1960s and early 1970s found that disadvantaged children who had access to food stamps in early childhood and whose mothers had access during pregnancy had better health and educational outcomes as adults than children who didn’t have access to food stamps.

Among other things, children with access to food stamps were less likely in adulthood to have stunted growth, be diagnosed with heart disease, or be obese. They also were more likely to graduate from high school.

Supplementing families’ incomes improves children’s health and educational outcomes and future earnings. Many studies have linked increases in tax credits for working families with better health and educational outcomes for children. Gordon Berlin, president of MDRC, the leader in evaluation of welfare-to-work programs, has reported that “We have reliable evidence involving thousands of families in multiple studies demonstrating that ‘making work pay’ [by supplementing low earnings] causes improvements in young children’s school performance.”

Numerous studies have found that young children in low-income families do better in school if their families receive additional income from the EITC or similar supports. For example, one study concluded that raising family income through refundable tax credits (primarily the EITC) increases the likelihood that children in the family will attend college and have higher earnings as adults. In fact, the authors project that due to improvements in children’s reading and math test scores as a result of the EITC and CTC, each dollar of income provided through the tax credits increases a child’s future earnings by more than one dollar.

In addition, an analysis of ten rigorously assessed anti-poverty and welfare-to-work programs found that with every additional $1,000 of income, the programs boosted low-income young children’s academic performance by the equivalent of about one point on an IQ scale. Other studies using other data and methods have foundsimilar effects.

Similarly, a more recent study found that children receiving larger state or federal EITCs tend to do better academically in both the short and long term. For example, an increase of about $3,000 (in 2008 dollars) in the federal maximum EITC during the 1990s resulted in higher math test scores for the affected children at the time, as well as a 7.2 percentage-point increase in high school completion several years later and a 4.8 percentage-point increase in college enrollment by age 19.

Another study found that children in low-income families that received an annual income boost of $3,000 (in 2005 dollars) between the children’s prenatal year and fifth birthday earned an average of 17 percent more as adults, and worked 135 hours more annually, than similar children whose families did not receive the added income. The additional 135 hours of work is nearly a third of the gap in adult work hours between children raised in poor families and children raised in families with incomes exceeding twice the poverty line.

The EITC boosts employment among parents. The EITC’s positive impacts aren’t limited to children; by helping “make work pay,” the credit also acts as a powerful work incentive for adults. The EITC expansions enacted in the 1990s “appear to be the most important single factor in explaining why female family heads [of households] increased their employment over 1993-1999,” according to a well-regarded study.

Public programs provide health coverage to millions of seniors and low-income people. Medicare and Medicaid provide health coverage to millions of seniors, people with disabilities, parents, children, and (in states that adopt health reform’s Medicaid expansion) childless adults with incomes up to 138 percent of the poverty line. Health reform also provides near-poor and moderate-income people with subsidies to buy private coverage through insurance marketplaces.

Public programs focus on helping people who are elderly, disabled, or in working families. Some 90 percent of recipients of government assistance are elderly, have serious disabilities, or are in a family that is working much of the year. Still others want work (or more work) but can’t find it.

Even if we limit our analysis to means-tested programs, we find that 85 percent of recipients are elderly (7 percent), disabled (11 percent), or in a working family (67 percent).

These facts contradict assertions that safety net programs create a large class of working-age, able-bodied Americans who prefer to depend on government benefits rather than work. The leading academic research concludes that the safety net has only a small effect in reducing employment, especially since some programs — including tax credits like the EITC — increase work.

Part III: The Safety Net Is Limited

Many households continue to face hardships. Nearly 1 in 5 American households struggled to meet one or more of nine measures of basic need in 2011, Census data show. For example, they were unable to keep up with monthly rent payments, had utilities cut off, or didn’t always have enough food. While material hardships are highest among households with cash incomes below the poverty line, they also remain high among near-poor families (those with incomes between 100 and 200 percent of the poverty line).

A CBPP analysis of the Census data indicates that 58 percent of poor children lived in households that experienced at least one of four serious hardships: “low food security” (i.e., problems affording adequate food), overcrowded housing, falling behind on rent or mortgage payments, or having utilities cut off. Close to half of children in near-poor families faced such hardships, too.

This is especially troubling in light of growing evidence that young children whose families struggle to afford the basics may be exposed to high levels of stress that can hinder children’s healthy brain development and future academic achievement.

Other countries do more than the United States to reduce poverty. Many other wealthy countries’ poverty rates are similar to (or even higher than) the U.S. rate before factoring in the impact of the safety net. But these countries have lower poverty rates — sometimes much lower — after counting benefits from government programs. This reflects the fact that nearly all of these other countries do more to fight poverty: their programs are more generous, more accessible, and broader in scope than those in the United States.